Using the Life Estate Deed

After further dialog with the client it is most often discovered that what the client seeks is the lifetime transfer in ownership of real property to children. Complying with the request can be easily, and quite inexpensively, completed, but…such transactions, as requested, are fraught with dangers.

 

The desire to effect a lifetime transfer to children is an understandable and a legitimate estate planning goal. But transferring full ownership to children places the parent’s right, and security, in the home, at risk. Once property is transferred into a child’s name, the property becomes subject to many different potential calamities; creditors of children can make a claim to the property; it can become subject to dispute in divorce, what if the child pre-deceases you? And when the property is sold by the children, the amount of capital gains tax could be much more than anticipated.

 

The BEST estate planning tool to use to affect a lifetime transfer of the home is a

LIFE ESTATE DEED (LED). The LED allows parents to transfer ownership while avoiding many, if not all, of the problems listed above associated with an outright transfer.

 

The LED results in no additional capital gains taxes when property is sold after the parents passing. And, most importantly, the parent’s right to continue to live in, and manage the home, with NO change in lifestyle, and NO risk of losing the home to a child’s creditors, or divorcing spouse, or to unwanted heirs of a predeceased child, is FULLY protected. The LED is also a very inexpensive way to avoid probate for the home, particularky out-of-state property.

 

Parents should be cautious of a lifetime transfer of the home to children. If considered, the LED ought to be examined.